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2013 (2) TMI 39 - HC - FEMABreach of principles of natural justice - non providing of cross-examine of the persons whose statements have been supplied - petitioners were charged with contravention of the provisions of Section 42 of the FEMA - Held that - Neither the provisions of FEMA i.e., Section 16 which requires a reasonable opportunity to be given to the party against whom a complaint is instituted or the Adjudication Rules, in particular Rule 4 (5), oblige the adjudicating authority to grant as of right the opportunity to the noticees to cross-examine the persons who may have given statements explaining a transaction. The provisions of Section 16 of the FEMA and Rule 4 of the Adjudication Rules do not explicitly advert to this aspect, therefore, much would depend on the discretion of the adjudicating authority as he progress with the enquiry. See M/s. Kanungo and Company Vs. Collector of Customs and Others 1972 (2) TMI 35 - SUPREME COURT OF INDIA On a fair reading of the statute and the Rules suggests that there is no duty of disclosure of all the documents in possession of the Adjudicating Authority before forming an opinion that an inquiry is required to be held into the alleged contraventions by a noticee. Even the principles of natural justice and concept of fairness do not require the statute and the Rules to be so read. Any other interpretation may result in defeat of the very object of the Act. Concept of fairness is not a one way street. The principles of natural justice are not intended to operate as roadblocks to obstruct statutory inquiries. Duty of adequate disclosure is only an additional procedural safeguard in order to ensure the attainment of the fairness and it has its own limitations. The extent of its applicability depends upon the statutory framework.Thus at this stage, it cannot be stated that mere denial of the request for cross-examination has led to breach of principles of natural justice and thus, warranting an intercession by this court under Article 226 of the Constitution of India.
Issues Involved
1. Breach of principles of natural justice due to denial of cross-examination. 2. Applicability of the Indian Evidence Act, 1872 to adjudication proceedings under FEMA. 3. Right to cross-examine in proceedings with court-like trappings. 4. Impact of denial of cross-examination on the right of appeal and potential civil imprisonment. Detailed Analysis Breach of Principles of Natural Justice due to Denial of Cross-Examination The petitioners argued that the denial of cross-examination resulted in a breach of the principles of natural justice. They contended that the adjudicating officer compromised their right to cross-examine, which is integral to a fair hearing. The court, however, examined the sequence of events and found that the petitioners were given ample opportunities to present their case, including the provision of documents and statements relied upon by the respondents. The court emphasized that the principles of natural justice require fair play in action, which does not necessarily include the right to cross-examine in every instance. The court concluded that the respondents had substantially adhered to the principles of natural justice by providing necessary materials and opportunities for the petitioners to respond. Applicability of the Indian Evidence Act, 1872 to Adjudication Proceedings under FEMA The petitioners argued that the adjudicating authority wrongly construed Rule 4(5) of the Adjudication Rules by excluding the right to cross-examine based on the non-applicability of the Indian Evidence Act, 1872. The court noted that Rule 4(5) explicitly states that the adjudicating authority is not bound by the provisions of the Evidence Act. The court further observed that the discretion to allow cross-examination lies with the adjudicating authority, depending on the material at hand and the stage of the enquiry. The court supported this view by referencing previous judgments which held that principles of natural justice do not always mandate cross-examination, especially when the statutory framework does not explicitly provide for it. Right to Cross-Examine in Proceedings with Court-like Trappings The petitioners asserted that the proceedings before the adjudicating authority had the trappings of a court, thereby necessitating the right to cross-examine. The court acknowledged that while the proceedings might have certain court-like features, the right to cross-examine is not an absolute right and depends on the specific facts, statutory provisions, and the nature of the enquiry. The court cited various judgments to illustrate that the right to cross-examine is not inherent in every adjudicatory process and must be evaluated based on the context and necessity. Impact of Denial of Cross-Examination on the Right of Appeal and Potential Civil Imprisonment The petitioners argued that the denial of cross-examination would have serious consequences on their right to appeal, as Section 19 of FEMA requires a pre-deposit of the penalty imposed. They contended that failure to deposit the penalty could result in civil imprisonment under Section 14 of FEMA. The court, however, held that the potential prejudice caused by the denial of cross-examination could only be assessed after the adjudicating authority had passed a final order. The court emphasized that the appropriate remedy for any perceived prejudice would be through an appeal, where the appellate authority could review the entire proceedings, including the denial of cross-examination. Conclusion The court dismissed the writ petition, concluding that the petitioners had been given sufficient opportunities to present their case and that the denial of cross-examination did not, at this stage, constitute a breach of the principles of natural justice. The court highlighted that the discretion to allow cross-examination lies with the adjudicating authority and that any prejudice caused by its denial could be addressed in an appeal.
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